Scientists from the Intergovernmental Panel on Climate Change — the world’s most authoritative body on climate science — agree that to reach national and global climate goals, carbon dioxide removal (CDR) must complement rapid and deep emissions reductions. CDR includes an array of approaches and technologies that pull carbon dioxide (CO2) directly from the air, ranging from familiar methods like planting trees, to developing and deploying new technologies like direct air capture (DAC). With the growing recognition of its critical role, carbon removal has seen significant steps forward in terms of federal policy support and funding for research, development and demonstration, as well as deployment. Even with this important progress, additional policies are needed to support development and deployment of a diverse suite of carbon removal approaches.
The only federal policy supporting carbon removal deployment today is the 45Q tax credit. It was originally enacted in 2008 to support geologic sequestration of CO2, then expanded in 2018 and again in 2022, as part of the Inflation Reduction Act (IRA). For CO2 captured with DAC, 45Q provides up to $180 per metric ton of CO2 (tCO2) for geologic sequestration and up to $130/tCO2 for utilization. For CO2 removed via bioenergy with carbon capture, it provides up to $85/tCO2 for geologic sequestration and up to $60/tCO2 for utilization.
Carbon removal methods in addition to DAC and bioenergy with carbon capture and storage (BECCS) are being developed — and in some cases deployed — including enhanced rock weathering, marine carbon dioxide removal and other approaches that use biomass, but they are not eligible for the 45Q tax credit. To better support a diverse range of CDR approaches and level the playing field, it is critical to enact policies that provide deployment support that is open to any kind of eligible removal technology.
The Carbon Dioxide Removal Investment Act — introduced by Senator Michael Bennet (D-Colo.) and Senator Lisa Murkowski (R-Alaska) — would take significant steps toward filling this gap.
The bill proposes a credit of $250/tCO2 for all approaches except for BECCS, which would receive $110/tCO2. Because BECCS produces energy, which provides revenue, it does not require as high a level of support. Importantly, this tax credit would be based on net carbon accounting. All emissions associated with removal and sequestration processes need to be subtracted from the gross amount of CO2 sequestered to yield the net amount sequestered — and only this net amount would receive credits. This is a key difference from the current 45Q tax credit, which does not require life-cycle accounting to claim the sequestration credit, and the reason this proposed credit level is higher than the 45Q credit. The credit would be known as 45BB, for its potential place in the tax code.
Taxpayers claiming this credit would not be able to also claim the 45Q tax credit (or the 48C advanced energy credit) in the same year. Carbon removal projects that also produce electricity, hydrogen or fuel will only be able to also claim such a credit (40B, 45, 45V, 45Y or 45Z) if that electricity, hydrogen or fuel is consumed by the qualifying carbon removal project.
To be eligible under the Carbon Removal Investment Act carbon removal approaches must:
- Provide net carbon removal based on project-level lifecycle accounting;
- Demonstrate a high likelihood of storing CO2 for at least 1,000 years; and
- Be able to quantify the carbon removed with a certainty threshold of +/- 20% with 95% confidence based on field trials
Qualifying carbon removal projects must use an eligible carbon removal approach and:
- Be based in the United States or waters regulated by the United States; and
- Be placed into service before January 1, 2035
For biomass-based approaches, the legislation includes restrictions on eligible biomass feedstocks to avoid negative impacts on ecosystems and agriculture. Eligible feedstocks include agricultural wastes and residues, invasive plant species, algae, food waste and other specific types of biomass waste. The legislation directs the National Academies of Sciences, Engineering, and Medicine, in collaboration with the Secretary of Energy and the Secretary of Agriculture, to conduct two studies to refine and/or add to the feedstock eligibility criteria within one year of enactment. These studies include assessment of the impacts of additional sources of biomass such as forest residues, and additional analysis of the necessary level of agricultural residue retention to maintain soil carbon stocks.
For marine CDR approaches, the legislation directs the Administrator of the National Oceanic and Atmospheric Administration, the Administrator of the Environmental Protection Agency (EPA) and the Director of the Bureau of Ocean Energy Management to, within one year of enactment, develop environmental safety standards that apply to all eligible approaches and to certify which approaches meet these environmental safety standards. The standards are then reviewed every three years and the certification of approaches are reviewed every two years.
Upon the legislation’s enactment, the Secretary of the Treasury, in consultation with the Secretary of Energy, must establish a selection process within one year to determine qualifying CDR approaches. They would be required to publish an initial list of eligible approaches within 18 months of enactment and update it every year thereafter. The legislation also directs the Secretary of Energy and EPA Administrator, within one year of enactment, to establish a process to determine and report net removals based on project-level greenhouse gas accounting. Measurement of removal must include quantification of uncertainty and be verified by independent third-party verifiers.
Lastly, no later than three years after the bill is enacted, and every three years after that, the Secretary of the Treasury, the Secretary of Energy and the EPA Administrator must conduct a panel review with experts from government, academia, civil society and the private sector to recommend improvements to the selection process and lifecycle greenhouse gas accounting requirements.
Why This Legislation Is Important
The Carbon Removal Investment Act has the potential to make a big impact for a range of reasons. It is not only open to any eligible CDR approach, but it is also designed to accommodate new CDR approaches that may be developed in the future. Additionally, it would create critical safeguards for biomass and marine CDR approaches and address the need for lifecycle accounting.
Enhancing the 45Q tax credit as part of the IRA provided support for both DACS and BECCS, but its eligibility criteria exclude other types of CDR approaches. For example, 45Q requires precise measurement of CO2 from where it is captured to where it is stored or utilized. This new legislation instead proposes technology- or method-neutral criteria to determine eligibility. And, for biomass and marine CDR pathways that present concerns about environmental or other impacts, it lays out additional criteria, deferring to agencies with expertise.
The requirement for lifecycle carbon accounting and crediting only for net tons removed is also a critical shift. Net accounting is important because it credits the amount of CO2 removal that the atmosphere feels; offsetting emissions associated with the CDR process are subtracted from the total gross removal to only credit the true climate impact of the project.
Carbon removal is needed to meet national and global climate goals, and supporting a diversity of eligible CDR approaches through technology-neutral deployment will be a crucial part of that effort. Carbon removal projects that are carried out responsibly can also provide meaningful local benefits, including job creation, investment and other project-specific benefits.